Business and financial analysis research

Currency War-Who is the currency manipulator?


US President Donald Trump and other U.S officials have accused Russia, China, Germany and Japan of devaluing their currencies while the United States raises interest rates.  The Trump administration is increasingly turning to currency policy to combat any trade imbalances.

Recently President Donald Trump post on the Twitter said that, "Russia and China are playing the Currency Devaluation game as the US keeps raising interest rates. Not acceptable!"  It referred to what he sees as unfair trading advantages - if a country's currency is artificially low, its exports are more competitive.  Higher US interest rates would generally causes money flees in, increase the value of the US dollar, pushing currencies upward and hurting US exports which commodities become more expensive; driving up America’s trade deficit.

China’s yuan, though, has gained about 10 percent against the dollar over the past 12 months, climbing in March to the strongest level since August 2015.  The ruble has weakened more than 9 percent against the dollar in the past year.  The Japanese yen had appreciated up to 11percent from USDJPY 118.40 down to below USDJPY 105 over the past 16 months.  However, Trump has been nudging the dollar lower as a way to increase exports, reduce the trade deficit and boost profits for multinational companies.  The US dollar index, which measures the greenback's value against a basket of major trading partner currencies, has declined more than 11 percent since President Donald Trump became president. 

Each country will have its own monetary policy at different time points.  Currency rises or falls will affect different type of industries, importer or exporter will have different influences cause by currency appreciate or depreciate.   How to achieve a balance between them is a major challenge for every country.

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